When the Global Financial Crisis started in 2008, the Federal Reserve (along with just about every central bank in the world) took the unprecedented step of conjuring trillions of dollars out of thin air.

In the Fed’s case, it was roughly $3.5 trillion, about 25% of the size of the entire US economy at the time.

That’s a lot of money.

And after nearly a decade of this free money policy, there is more money than has ever been in the financial system than ever before.

Economists measure money supply, something they call “M2”. And M2 is at record high levels– nearly $9 trillion higher then at the start of the crisis in 2008.

Now, one might expect that, over time, as the population grows and as the economy grows, the amount of money in the system would increase.

But even on a per-capita bases, and relative to the size of US GDP, there is more money in the system than there has ever been, at least in the history of modern central banking.

Again, that has consequences.

One of those consequences is that asset prices have exploded.

Stocks are at all-time highs. Bonds are at all-time highs. Many property markets are at all-time highs. Even the prices of alternative assets like private equity or artwork are at all-time highs.

But isn’t that a good thing?

Well, let’s look at stocks as an example.

As investors, we trade our hard-earned savings for shares of a [hopefully] successful, well-managed business.

That’s what stocks represent– ownership interests in a business. So investors are ultimately buying a share of a company’s net assets, profits, and free cash flow.

Here’s where it gets interesting.

Let’s look at Exxon Mobil as a great example.

In 2006, the last full year before the Federal Reserve started any monetary shenanigans, Exxon reported profit (net income) of nearly $40 billion, with Free Cash Flow (i.e. the money that’s available to pay out to shareholders) of $33.8 billion.

And at the time, Exxon’s debt was $6.6 billion.

Ten years later, Exxon’s annual report for the full year of 2016 showed revenue of $226 billion, net income of $7.8 billion, free cash flow of $5.9 billion, and an unbelievable debt level of $28.9 billion.

In other words, compared to its performance in 2006, Exxon in 2016 g 40% less revenue [due to the decline in oil prices].

Plus its profits and free cash flow collapsed by more than 80%. And debt skyrocketed by over 4x.

So what do you think happened to the stock price over this period?

It must have gone down, right? I mean… if investors are essentially paying for a share of the business’s profits, and those profits are 80% less, then the share of the business should also decline.

Except– that’s not what happened. Exxon’s stock price at the end of 2006 was around $75. By the end of 2016 it was around $90, 20% higher.

And it’s not just Exxon. This same curiosity fits to many of the largest companies in the world.